U.S. Department of Justice

Former NASDAQ Executive Pleads Guilty to Insider Trading

WASHINGTON – A former managing director of the NASDAQ Stock Market
pleaded guilty today for his participation in an insider trading
scheme in which he purchased and sold stock in NASDAQ-listed companies
based on material, non-public information he obtained in his capacity
as a NASDAQ executive, announced Assistant Attorney General Lanny
A. Breuer of the Criminal Division, U.S. Attorney Neil H. MacBride
of the Eastern District of Virginia and Postal Inspector in Charge
of Criminal Investigations Gerald O’Farrell of the U.S. Postal Inspection
Service (USPIS).

Donald Johnson, 56, a resident of Ashburn, Va., pleaded guilty before
U.S. District Judge Anthony J. Trenga in the Eastern District of
Virginia to one count of securities fraud. In pleading guilty, he
admitted that he purchased and sold stock in NASDAQ-listed companies
based on material, non-public information, or inside information,
on several different occasions from 2006 to 2009.

“Mr. Johnson was a fox in a hen-house,” said Assistant Attorney General
Breuer. “NASDAQ-listed companies entrusted him with their sensitive,
non-public information so that he could provide them with analyses
about their stock. He then used that very information to cheat the
system and make an illegal profit. Insider trading by a gatekeeper
on a securities exchange is a shocking abuse of trust, and must be
punished. The integrity of our securities markets is vital to the
U.S. economy, and the Justice Department is determined to take on
insider trading at every level.”

“Don Johnson used sensitive, confidential information as an executive
at NASDAQ to pad his retirement by more than $600,000,” said U.S.
Attorney MacBride. “He thought he could get away with it by using
his wife’s account and inside information to make relatively small
trades just a few times a year. But he learned what every other
trader on Wall Street must now realize: We’re watching.”

“The U.S. Postal Inspection Service continues to identify and aggressively
investigate those who commit securities fraud,” said Postal Inspector
in Charge of Criminal Investigations O’Farrell. “The agency has placed
a team of highly trained Postal Inspectors at the Department of Justice
in Washington, D.C., working in partnership with Department of Justice
attorneys, to assure that criminals who defraud innocent citizens
are prosecuted to the fullest extent of the law.”

According to court documents, from 2006 to September 2009, Johnson
was a managing director on NASDAQ’s market intelligence desk in New
York. The market intelligence desk provides trading analysis and
market information to the companies that list on NASDAQ. According
to court documents, Johnson monitored the stock of companies traded
on NASDAQ and offered NASDAQ-listed companies information and analyses
concerning trading in their own stock. To enable him to perform
these services, NASDAQ-listed companies routinely entrusted Johnson
with material, non-public information about their stock, including
advance notice of announcements concerning earnings, regulatory approvals
and personnel changes. Johnson admitted that he repeatedly used
this information to purchase or sell short stock in various NASDAQ-listed
companies shortly before the information was made public. He would
then generate substantial gains by reversing those positions soon
after the announcement. According to court documents, to conceal
his illegal trading, Johnson executed these trades in a brokerage
account in his wife’s name. Johnson failed to disclose this account
to NASDAQ in violation of NASDAQ rules.

Johnson admitted that he made illegal purchases and sales of stock
in NASDAQ-listed companies on at least eight different occasions,
generating gains totaling more than $640,000. The companies whose
securities he traded were Central Garden and Pet Co.; Digene Corporation;
Idexx Laboratories Inc.; Pharmaceutical Product Development Inc.;
and United Therapeutics Corporation. According to court documents,
in November 2007, Johnson used inside information related to successful
trial results for United Therapeutics’ drug Viveta (now called Tyvaso)
to purchase shares of United Therapeutics before the trial results
were announced. Soon after the announcement, Johnson sold the shares
and gained more than $175,000 in profits. According to court documents,
in July 2009, Johnson used inside information about the approval
of its drug Tyvaso to purchase shares of United Therapeutics before
the approval was announced. He sold the shares after the announcement
and gained more than $110,000 in profits.

Johnson is scheduled to be sentenced on Aug. 12, 2011. The maximum
penalty for securities fraud is 20 years in prison and a fine of
$5 million.

In a related action, the Securities and Exchange Commission today
filed a civil enforcement action against Johnson in the Southern
District of New York.

This case is being prosecuted by Trial Attorney Justin Goodyear of
the Criminal Division’s Fraud Section and Assistant U.S. Attorney
Raymond E. Patricco Jr., of the Eastern District of Virginia. The
case was investigated by USPIS. The Financial Industry Regulatory
Authority provided assistance. Brigham Cannon, formerly a Trial
Attorney of the Criminal Division, also assisted with the investigation.

This prosecution is part of efforts underway by President Barack
Obama’s Financial Fraud Enforcement Task Force. President Obama established
the interagency Financial Fraud Enforcement Task Force to wage an
aggressive, coordinated and proactive effort to investigate and prosecute
financial crimes. The task force includes representatives from a
broad range of federal agencies, regulatory authorities, inspectors
general and state and local law enforcement who, working together,
bring to bear a powerful array of criminal and civil enforcement
resources. The task force is working to improve efforts across the
federal executive branch, and with state and local partners, to investigate
and prosecute significant financial crimes, ensure just and effective
punishment for those who perpetrate financial crimes, combat discrimination
in the lending and financial markets, and recover proceeds for victims
of financial crimes. For more information about the task force visit: www.stopfraud.gov.